IDirect Inflation Sept14

8/10/2019 IDirect Inflation Sept14

1/9

September 15, 2014

Monthly Inflation

ICICI Securities Ltd|

Retail Equity Research

CPI ................................... ...................................... ............... down to 7.8% from 7.96% YoY

WPI ................................. .................................... ................ eases to 3.74% from 5.19% YoY

CPI on trackKey readings

CPI August 2014, came in line with market expectations (Reuters survey)

at 7.8 , marginally lower than 7.96 in July 2014

The August CPI food inflation (CFPI) remains sticky at 9.4 while core

CPI moderated to 6.9 from 7.4 in July

WPI inflation eased considerably to 3.74 at its five-year low dragged by

softening of primary articles inflation to 3.89 (July: 6.8 ) and fuel

inflation to 4.5 (July 7.4 )

CPI for July did not see any revision while June WPI was revised up 23

bps to 5.66 from 5.43

CPI: Favourable base a positive

CPI August 2014 moderated marginally to 7.8% as services inflation

(weight: 26%) cooled from 6.5% to 5.9%. Inflation in the transport

segment (weight 7.6%) has in the last four months eased off to 4.7% in

August from 7% in May, partially explained by a drop in fuel cost. Core

CPI, therefore, has moderated to 6.9% from 7.4% in July. Other than

services, inflation in the housing and clothing & bedding segment has

also been moderating gradually over the past two months but remains

high at 8.4% each

Food inflation persisted at 9.4%. The pace of increase in price of

vegetable moderated to 7% MoM against 16% in the previous month

and may moderate further on seasonal factors dragging food inflation

down. As per the latest data, area sown under the Kharif crop has

marginally declined 3% compared to the same period last year.

However, there was a 6.0% and 8.5% decline in pulses and oilseeds

sowing, respectively, which may make them dearer, going ahead.

However, combined, they have a weightage of ~5% in the CPI index

and, hence, the impact on the headline may be marginal

CPI urban and rural August 2014 also moderated to 7.04% and 8.35%,

respectively

WPI: At five year low dragged by softening primary articles fuel inflation

WPI August 2014 softened to 3.74% from 5.19% in July 2014 due to high

base and a drop in most commodity prices. Primary articles inflation

eased to 3.9% from 6.8%, fuel inflation eased to 4.5% from 7.4% while

core inflation eased to 3.5% from 3.6% in August 2014

Vegetable inflation was as high as 80% in the same month last year. This

high base led to a 4% drop in August 2014 inflation. Seasonally, the

price of most staples like onion, potato, etc. have either dropped or the

pace of increase has moderated. However, YoY prices of tomatoes are

up 70% while potatoes are up 61%. Inflation in fruits and milk stands at

20% and 12%, respectively, and is disquieting

Fuel group inflation moderated to 4.5% from 7.4% in July. In August, last

year the Electricity index was revised upwards sharply by 6% leading to

higher base creeping in. Apart from this, drop in decontrolled fuel pricelike petrol, bitumen, light diesel oil, etc. by 2-3% led the moderation

Core WPI remained firm at 3.6% but with moderation in global

commodity prices and a stable rupee we may not see much pressure

building in

InflationCPI August 2014 came in as expected at 7.8%

9.5

2

9.8

4

10.1

7

11.1

6

9.8

7

8.7

9

8.0

3

8.3

1

8.5

9

8.2

8

7.4

67.9

6

7.8

0

4.0

6.0

8.0

10.0

12.0

Aug-13

Sep-13

Oct-13

Nov-13

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

(

%)

Components of CPI

Particulars Weights May-14 Jun-14 Jul-14 Aug-14

CPI 100.0 8.28 7.46 7.96 7.80

Food 42.7 9.59 8.04 9.39 9.46

Fuel & light 9.5 5.00 4.73 4.47 4.08

Housing 9.8 9.18 9.15 8.94 8.48

Clothing 4.7 8.79 8.65 8.73 8.46

Miscellaneous 26.3 7.01 6.54 6.56 5.94

WPI softens on favourable base

5.6

5

4.7

7

4.5

85.1

65.8

5 6.9

9

7.0

5

7.2

47.5

2

6.4

0

5.1

1

5.0

3 6.0

0

5.5

56.1

8

5.6

6

5.1

9

3.7

4

2.03.04.05.06.07.08.0

Mar-13

Apr-13

May-13

Jun-13

Jul-13

Aug-13

Sep-13

Oct-13

Nov-13

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

(%)

Components of WPIParticulars Weights May-14 Jun-14 Jul-14 Aug-14

WPI 100.0 6.18 5.66 5.19 3.74

Primary Articles 20.1 8.58 7.01 6.78 3.89

Fuel & Power 14.9 10.53 9.04 7.40 4.54

Manuf.Goods 65.0 3.88 3.95 3.67 3.45

Monthly inflation

Particulars Weights May-14 Jun-14 Jul-14 Aug-14

CPI 100.0 0.58 0.93 1.77 0.97

Food 42.7 0.96 1.20 3.16 1.69

Fuel & light 9.5 0.14 0.58 0.57 0.07

Housing 9.8 0.36 1.14 0.42 0.49

Clothing 4.7 0.53 0.66 0.79 0.46

Miscellaneous 26.3 0.31 0.53 0.91 0.38

WPI 100.0 0.66 0.55 0.87 0.60

Primary Arti. 20.1 1.82 1.42 2.52 1.99

Fuel & Power 14.9 0.14 0.09 1.13 -0.33

Manuf.Goods 65.0 0.32 0.19 0.00 0.26

Analysts name

Kajal Gandhi

[email protected]

Sheetal Ashar

[email protected]


2/9

Page 2ICICI Securities Ltd|Retail Equity Research

Disinflation on track

Both CPI as well as WPI August 2014 signal that the pace of increase in

prices has moderated. Further, sowing data shows that deficient monsoons

may hamper production of food grains marginally as the area sown is down

mere 3% as compared to the previous year. Good buffer stocks and the

governments willingness to control food price by conducting open marketsales provides comfort that monsoon related price increase may not be

worrisome. Vegetable prices may further cool off on seasonal factors.

Globally, commodity price are all down. The IMF Commodity price index is

down 5% while the IMF commodity price index excluding fuel is down 3%.

This further cushions domestic inflation. We believe the medium-term

inflation target of CPI January 2015 at 8% will be met but uncertainty may

prevail over the target of 6% by January 2016, as a favourable base effects

wanes off and demand strengthens as growth picks up going into the next

year.

In the upcoming monetary policy, we believe the RBI may choose to further

monitor the inflation trajectory to get more clarity over its 6% CPI inflation

target. While Q1 GDP growth numbers came in better at 5.7%, IIP growth is

slower than expected. If the RBI chooses to push up growth citing

moderation in price pressures, there is an odd chance of the RBI cutting

rates in the immediate policy.

Exhibit 1:

Retail inflation eases to 7.8% as core CPI moderates to 6.9% from 7.4%

8.6

7.7

9.3

8.3

7.6

8.9

7.5

6.6

7.98

.0

7.4

8.5

7.8

7.0

8.4

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Combined Urban Rural

%

Apr-14 May-14 Jun-14 Jul-14 Aug-14

Source: CSO, ICICIdirect.com Research

Exhibit 2:Components of CPI

9.8

7.7

5.9

9.7

8.7

9.6

7.8

5.0

9.2

8.8

8.0

7.4

4.7

9.1

8.69

.4

7.4

4.5

8.9

8.79

.5

6.9

4.1

8.5

8.5

0.0

2.0

4.0

6.0

8.0

10.0

12.0

Food Inflation Core CPI Fuel & light Housing Clothing &

bedding and

footwear

%

Apr-14 May-14 Jun-14 Jul-14 Aug-14


RBIs Stance on Inflation

The balance of risks around the medium-term

inflation path and especially the target of 6% by

January 2016, are still to the upside, warranting a

heightened state of policy preparedness to containthese risks if they materialise. In the months ahead,

government actions on food management and to

facilitate project completion should improve supply.

However, as consumer and business confidence pick

up, aggregate demand will also strengthen. The

Reserve Bank of India will act as necessary to ensure

sustained disinflation


3/9


Exhibit 3:

Service inflation slips marginally as transport inflation eases

4.0

5.0

6.0

7.0

8.0

9.0

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

%

Medical Care Education Recreation

Transport Personal Care Households


Exhibit 4:

Core CPI 3MMA seen bottoming-out

4.0

5.0

6.0

7.0

8.09.0

10.0

11.0

12.0

Jun-13

Aug-13

Oct-13

Dec-13

Feb-14

Apr-14

Jun-14

Aug-14

%

Core CPI 3MMA Core CPI


Exhibit 5:

CPI Breakdown by components (% YoY )

Build up Average

Weights Aug-13 Jul-14 Aug-14 FY15 FY14

Cereals 14.6 14.09 7.45 7.39 2.18 13.34

Pulses 2.7 1.66 5.94 6.88 3.85 4.31

Oils&Fats 3.9 0.78 0.70 0.63 0.14 1.83

Egg meat fish 2.9 13.65 7.68 7.71 4.02 12.10

Milk 7.7 7.94 11.26 11.78 5.03 8.65

condiments & spices 1.7 6.17 8.74 9.36 4.47 7.21

Vegetables 5.4 26.48 16.88 15.28 41.37 25.54

Fruits 1.9 5.19 22.48 24.27 11.73 11.27

Sugar 1.9 -2.50 0.82 1.10 4.64 -0.39

Food 42.7 11.13 9.39 9.46 7.75 11.35

Non alcholic beverages 2.0 10.13 6.35 6.16 2.36 9.20

Prepared meals 2.8 9.76 7.77 7.78 2.97 9.50

Pan tobacco & intoxicants 2.1 8.72 8.71 8.86 4.48 9.16

Fuel & light 9.5 7.58 4.47 4.08 1.37 7.40

Housing 9.8 10.54 8.94 8.48 3.17 10.37

Clothing & bedding footwear 4.7 8.99 8.73 8.46 2.87 9.30

Medical Care 3.4 6.34 5.82 6.04 2.20 6.39

Education 5.7 8.06 7.85 7.78 4.62 8.16

Recreation 1.4 6.15 5.04 4.93 1.68 6.10

Transport 7.6 7.97 5.86 4.71 1.60 6.99

Personal Care 2.9 6.40 6.69 6.90 2.97 6.51

Households 4.3 5.51 6.49 4.99 0.89 5.43

Miscellaneous 26.3 7.13 6.56 5.94 2.30 6.83

CPI 100.0 9.52 7.96 7.80 5.07 9.49

Core CPI 40.8 8.18 7.42 6.88 1.38 7.99

Month


Double digit inflation in milk, vegetables and fruits is

disquieting though seasonal moderation may bring it

down

Fuel inflation moderated marginally. Stable crude oil

price and a stable currency may further provide

comfort

Core CPI moderated to 6.88% from revised 7.4% in

July. Moving average indicates that core CPI mayhave bottomed out. Although lower fuel cost may

translate in lower transport inflation which has

dropped to 4.7% and may further cushion core CPI


4/9


Exhibit 6:

CPI month on month (%)

Weights Apr-14 May-14 Jun-14 Jul-14 Aug-14

CPI 100.0 0.72 0.58 0.93 1.77 0.97

Cereals 14.6 0.15 0.14 0.29 0.87 0.71

Pulses 2.7 1.00 0.66 0.41 0.74 0.98

Oils&Fats 3.9 0.07 0.14 -0.14 0.07 0.00

Egg meat fish 2.9 0.47 1.00 1.19 0.72 0.58

Milk 7.7 0.67 1.20 1.12 0.98 0.97

condiments & spices 1.7 0.43 0.72 1.00 0.99 1.26

Vegetables 5.4 3.68 3.41 5.47 16.95 6.90

Fruits 1.9 6.99 0.97 0.34 2.36 0.71

Sugar 1.9 1.99 1.02 0.09 1.29 0.18

Food inflation 49.7 1.19 0.96 1.20 3.16 1.69

Non alcholic beverages 2.0 0.36 0.36 0.57 0.56 0.49

Prepared meals 2.8 0.42 0.56 0.49 0.70 0.76

Pan tobacco & intoxicants 2.1 0.54 0.73 0.79 1.51 0.84

Fuel & light 9.5 0.00 0.14 0.58 0.57 0.07

Housing 9.8 0.72 0.36 1.14 0.42 0.49Clothing & bedding footwear 4.7 0.40 0.53 0.66 0.79 0.46

Medical Care 3.4 0.24 0.39 0.47 0.39 0.70

Education 5.7 0.62 0.31 1.30 1.51 0.82

Recreation 1.4 0.17 0.17 0.42 0.58 0.33

Transport 7.6 -0.15 0.08 0.53 1.29 -0.15

Personal Care 2.9 0.31 0.55 0.62 0.77 0.69

Households 4.3 0.00 0.15 -0.22 0.59 0.37

Miscellaneous 26.3 0.15 0.31 0.53 0.91 0.38

Core CPI 40.8 0.32 0.35 0.70 0.77 0.41


CPI MoM increased at a faster pace of 0.97% MoM

against an average increase of 0.38% (H1CY14)


5/9


Exhibit 7:

WPI moderates on favourable base

5.9

7.0

7.0 7

.2 7.5

6.4

5.1

5.0

6.0

5.5 6

.2

5.7

5.2

3.7

1

2

3

4

5

6

7

8

9

Jul-13

Aug-1

3

Sep-1

3

Oct-13

Nov-1

3

Dec-1

3

Jan-1

4

Feb-1

4

Mar-14

Apr-14

May-1

4

Jun-1

4

Jul-14

Aug-1

4

%

0246810121416

182022

%

WPI (LHS) Manufactured Goods(LHS)

Food Articles Fuel Group


Exhibit 8:MSP hikes very moderate after two years of steep increase

7.8

17

.4

11

.4

6.7

15

.3

37

.0

19

.9

20

.3

2.3

8.1

11

.5

11

.7

3.8

0.0

0.0 1

.2

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Paddy Groundnut Maize Tur (Arhar)

%

FY12 FY13 FY14 FY15


Exhibit 9:Core inflation moderates to 3.5%

2

.30 2

.49

2.8

62

.99 3

.25

3.3

9 3

.82 4

.05

3.9

03

.99

4.0

8

3.5

8

3.4

5

2.0

3.0

4.0

5.0

Aug-1

3

Sep-1

3

Oct-13

Nov-1

3

Dec-1

3

Jan-1

4

Feb-1

4

Mar-14

Apr-14

May-1

4

Jun-1

4

Jul-14

Aug-1

4

%


Exhibit 10:Correction in crude oil price moderates fuel group inflation

5.0

7.0

9.0

11.0

13.0

15.0

17.0

Aug-13

Oct-13

Dec-13

Feb-14

Apr-14

Jun-14

Aug-14

%

85.0

90.0

95.0

100.0

105.0110.0

115.0

120.0

$/bl

Fuel group Mineral Oils Brent Crude

Source: Bloomberg, CSO, ICICIdirect.com Research

Exhibit 11:Stable currency, stable global commodity prices may anchor

core WPI

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

Aug-13

Sep-13

Oct-13

Nov-13

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

%

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

%

Rupee Depreciation(LHS) IMF Metal Price Index

Source: Bloomberg, IMF, ICICIdirect.com Research

WPI eased to 3.7% as inflation moderated across

components on a favourable base


6/9


Exhibit 12:

WPI - Breakdown by components (% YoY )

Build up Average


WPI 100.0 6.99 5.19 3.74 3.00 5.98

Primary Articles 20.12 13.57 6.78 3.89 9.31 9.84

Fuel & Power 14.91 12.66 7.40 4.54 -0.09 10.16

Manufactured Goods 64.97 2.31 3.67 3.45 1.04 2.99

Month

Source: CSO,ICICIdirect.com Research

Exhibit 13:Primary articles - Breakdown by components (% YoY)

Build up Average



Food Articles 14.3 19.17 8.43 5.15 13.13 12.76

Food Grains & Cerelas 4.1 8.91 4.32 4.42 2.43 9.09

Rice 1.8 21.33 6.85 5.44 5.17 16.51

Wheat 1.1 9.38 1.02 0.67 -3.67 9.20

Pulses 0.7 -14.70 3.31 7.81 4.92 -5.52

Fruits & Vegetables 3.8 44.00 11.97 4.78 46.11 23.11 Milk 3.2 6.02 10.46 12.18 6.48 6.05

Eggs, Meat & Fish 2.4 20.15 2.71 -5.87 -4.10 12.77

Spices 0.6 10.17 28.25 33.13 16.54 17.22

Non-Food Articles 4.3 1.21 3.32 4.19 0.46 5.60

Fibres 0.9 11.79 -3.16 -9.54 -5.41 15.08

Oil Seed 1.8 -6.74 6.36 12.38 5.22 2.31

Other Non Food Articles 1.4 1.01 2.25 2.58 -3.07 1.14

Minerals 1.5 1.99 2.37 -4.59 0.43 -0.12

Month


Exhibit 14:

Fuel group - Breakdown by components (% YoY)Build up Average


Fuel Group 14.9 12.66 7.40 4.54 -0.09 10.16

Coal 2.1 -8.94 -0.89 -0.89 0.00 -8.54

Mineral Oils 9.4 15.92 7.85 5.44 -0.17 11.61

Controlled Fuel :

LPG 0.9 8.39 8.90 6.07 -3.11 5.96

Kerosene 0.7 1.96 -2.39 -4.44 -2.27 2.22

High Speed Diesel 4.7 27.76 12.64 11.61 3.98 18.68

Market determined fuel :

Petrol 1.1 3.29 5.90 -0.15 -2.99 3.40

Aviation Turbine fuel 0.3 7.58 5.77 -1.28 -6.66 6.26 Light Diesel Oil 0.1 16.01 11.60 3.78 -2.20 9.69

Bitumen 0.2 19.43 6.36 2.30 -2.94 21.98

Furnace Oil 0.5 4.49 -0.31 -0.87 -5.53 3.92

Lubricants 0.2 4.93 4.18 4.18 0.00 6.10

Electricity 3.5 20.69 12.03 4.88 0.12 22.23

Month


As per the ministry data, in the current Kharif season until

September 5, area coverage is higher by 14.2 lakh hectare

under rice, 3.7 lakh hectare under maize, 1.1 lakh hectare under

urad, 5.6 lakh hectare under soybean, 1.3 lakh hectare and 13.9

lakh hectare under cotton as compared to average area (as on

September 5, 2014)

However, area coverage was lower by 7.8 lakh hectare under

Jowar, 13.8 lakh hectare under Bajra, 2.6 lakh hectare under

Moong, and 6.7 lakh hectare under groundnut (as on

September 5, 2014)

Overall, we may not see prices shooting up on account of

lower production as area under coverage has seen a

comfortable increase in major commodities

Global crude oil prices declined despite geopolitical tensions

in a number of countries in the Middle East, Africa and

Central Europe as Global supplies continue to outpace

demand, as per the IMF data

Global crude oil price moderation will lead to lower de-

controlled fuel prices, thereby softening overall fuel inflation


7/9


Exhibit 15:

Manufactured goods - Breakdown by components (% YoY)

Build up Average


Manufactured Goods 65.0 2.31 3.67 3.45 1.04 2.99

Food Products 10.0 2.43 4.11 3.43 3.31 3.24

Manufacturing Ex Food 55.0 2.30 4.08 3.58 0.53 2.93

Beverages & Tobacco 1.8 4.17 9.30 9.55 1.99 6.08

Textiles 7.3 5.51 5.11 4.57 0.77 5.81

Wood & Wood Products 0.6 3.86 5.10 4.27 -1.07 4.75

Paper & Paper Products 2.0 3.91 6.19 6.17 1.36 4.64

Leather & Leather Products 0.8 6.29 1.12 2.16 0.48 6.66

Chemicals & Chemical Products 12.0 3.28 4.00 4.05 0.98 3.63

Non-Metallic Mineral Products 2.6 0.85 0.60 2.17 1.19 1.81

Basic Metals 10.7 -2.16 2.84 2.15 -0.72 -0.93

Machinery & Machine Tools 8.9 2.10 2.37 2.67 0.98 2.56

Transport, Equipment & Parts 5.2 3.72 1.88 1.57 0.15 3.60

Month


Exhibit 16:WPI month on month (%)

Weights Apr-14 May-14 Jun-14 Jul-14 Aug-14

WPI 100.00 0.28 0.66 0.55 0.87 0.60


Food Articles 14.34 1.88 2.34 2.25 3.40 2.63

Non-Food Articles 4.26 -0.37 0.88 -1.19 0.88 0.28

Minerals 1.52 0.03 0.12 0.29 -0.26 0.26

Fuel & Power 14.91 -1.12 0.14 0.09 1.13 -0.33

Coal 2.09 0.00 0.00 0.00 0.00 0.00

Mineral Oils 9.36 -1.60 0.17 0.13 1.67 -0.50

Electricity 3.45 0.12 0.00 0.00 0.00 0.00

Maufactured Products 64.97 0.26 0.32 0.19 0.00 0.26 Food Products 9.97 1.48 0.70 0.29 0.75 0.06

Mfg.Products (Ex food) 55.00 0.02 0.17 0.20 -0.12 0.25

Beverages & Tobacco 1.76 0.87 0.10 0.25 0.30 0.45

Textiles 7.33 0.00 0.63 0.07 0.00 0.07

Wood & Wood Products 0.59 0.85 -1.11 0.00 -0.80 0.00

Paper & Paper Products 2.03 1.22 0.00 0.07 -0.13 0.20

Leather & Leather Products 0.84 -0.75 -0.41 1.04 -1.03 1.66

Chemicals & Chemical Product 12.02 0.39 -0.07 0.13 0.00 0.52

Non-Metallic Mineral Products 2.56 -0.48 0.72 0.66 -0.53 0.83

Basic Metals 10.75 -0.66 0.24 0.00 -0.06 -0.24

Machinery & Machine Tools 8.93 0.15 0.30 0.52 -0.45 0.45

Transport, Equipment & Parts 5.21 -0.07 0.07 0.22 -0.22 0.15


Core inflation eased to 3.58% on favourable base. Stable

currency and lower global commodity prices may helpcontain core inflation

Seasonal pace of price increase modest


8/9


Monsoon update

For the country, as a whole, cumulative rainfall during this years monsoon

has so far, up to September 10, been 11% below the long period average as

against 18% till last month up to August 10. Out of 36 meteorological

subdivisions, the rainfall has been excess over 1 sub-division, normal over

23, deficient over 12 sub-divisions and no sub-division under scanty rainfall.In area-wise distribution, 69% area of the country received normal rainfall

and remaining 31% area received deficient/scanty rainfall.

As per the latest information available on sowing of crops, around 93.5% of

the normal area under kharif crops has been sown up to September 5, 2014.

Area sown under all kharif crops taken together has been reported to be

986.59 lakh hectares at All India level as compared to 1020.78 lakh hectares

the corresponding period of last year

Governments six-month action plan to fight inflation

The government has formulated a six-month action plan to fight inflation.

The six-month action plan will include the following elements:

The plan will cover rice, jowar, bajra, onions, tomatoes, potatoes,

moong dal, masoor dal, tuar dal and edible oils, bread, milk and eggs

The states will map vulnerable areas prone to supply shortages for

special monitoring and ensure that stock-out situations do not occur

States will mobilise existing storage capacity enabling the

government/private/cooperative storage infrastructure to ensure that

adequate decentralised stocks are maintained

States will establish a price monitoring cell that will monitor prices of

these specific commodities on the basis of wholesale prices at the

mandis as well as retail prices obtained in various parts of the state to

enable the states to make market interventions, on a real time basis

The Food and Civil Supplies Corporation of the state should partner thenetwork of cooperative societies to sell important essential commodities

Effective operations against hoarders and black-marketers will need to

be taken. The Essential Commodities Act will be made more stringent by

making offences under the act non-bailable. Necessary amendments to

the Essential Commodities Act need to be made

Vegetables, fruits and other perishable commodities, which are price

sensitive, will be removed from the ambit of the APMC Act. State

governments will take immediate action to issue appropriate

notifications in this matter

In the interim, states will exempt these perishable commodities from the

APMC yard taxes/local fees, if any, to provide some relief on pricing

The Government of India should consider setting up a 'Price StabilizationFund' to enable states to undertake market intervention

The central government will coordinate implementation of the Action Plan

closely with states. The Joint Secretary, Consumer Affairs, Government of

India will be the National Focal Point and each State Government has been

advised to designate the Commissioner of Food and Civil Supplies of the

state as the state focal point for effective price monitoring of essential

commodities over the next six months.

Also, there are several other inflation control measures like improving supply

chain management, setting up of special courts to deal with hoarding and

black marketing, unbundling of the Food Corporation of India and

establishment of a national agriculture market. The newly formed

government has laid down all this in its agenda. As and when things get

implemented, food prices may start coming under control

Monsoon deficit (For season as a whole)

Regions

10-Aug 10-Sep

Country as a whole -18% -11%

Northwest India -29% -20%

Central India -7% -5%

South Pennisula -15% -4%

East & Northeast India -25% -14%

% departure from LPA

Source: IMD

.


9/9

ICICI S iti Ltd R il E i R h

Pankaj Pandey Head Research [email protected]

ICICIdirect.com Research Desk,

ICICI Securities Limited,

1st Floor, Akruti Trade Centre,

Road No 7, MIDCAndheri (East)Mumbai 400 [email protected]

Disclaimer

The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way,

transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written

consent of ICICI Securities Ltd (I-Sec). The author may be holding a small number of shares/position in the above-referred companies as on date of

release of this report. I-Sec may be holding a small number of shares/position in the above-referred companies as on date of release of this report.

This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been

made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and may not be used

or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this

report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your

specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make theirown investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This report may not be

taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. I-

Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a

guide to future performance. Actual results may differ materially from those set forth in projections. I-Sec may have issued other reports that are

inconsistent with and reach different conclusion from the information presented in this report. This report is not directed or intended for distribution

to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such

distribution, publication, availability or use would be contrary to law, regulation or which would subject I-Sec and affiliates to any registration or

licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain

category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

IDirect Inflation Sept14

Documents

Transcript of IDirect Inflation Sept14